Fuel Efficiency or Fuel Consumption?

Tue, 27 Jan 2009 16:56:08 +0000

One piece of "news" yesterday was the change in fuel efficiency standards on the horizon. From the Associated Press:

Also, Obama directed federal transportation officials to get going on new fuel efficiency rules, which will affect cars produced and sold for the 2011 model year. That step was needed to enforce a 2007 energy law, which calls for cars and trucks to be more efficient every year, to at least 35 miles per gallon by 2020.

Obama also meant to set a tone with his promises: Science will trump ideology and special interests, attention will stay high even when gas prices fall.

It was a none-too-subtle admonishing of previous administrations, chiefly George W. Bush's.

"It falls on us to choose whether to risk the peril that comes with our current course or to seize the promise of energy independence," Obama said. "And for the sake of our security, our economy and our planet, we must have the courage and the commitment to change."

Obama put that peril he mentioned in stark terms. He said dependence on foreign oil "bankrolls dictators, pays for nuclear proliferation and funds both sides of our struggle against terrorism. It puts the American people at the mercy of shifting gas prices, stifles innovation and sets back our ability to compete."

I like the direction of the policy, but my longstanding objections to the CAFE standards bear repeating:

First, as a means of addressing fuel consumption in vehicles, CAFE standards are a crude instrument. Total fuel consumption depends on the average fuel efficiency of all cars on the road and the total amount of miles driven. CAFE standards improve the efficiency of the newest cars on the road at the point of sale but do nothing for the efficiency of existing cars, the efficiency of new cars after the point of sale (e.g. maintenance), or the total miles driven by new or existing cars. By contrast, a tax on gasoline operates on all relevant margins to reduce consumption -- what you drive, how you drive it, and how much you drive it.

Second, as a matter of policy, CAFE standards focus too much on automobiles and too little on other areas. What about jet fuel? What about home heating oil? Periodically, the Congress and the President do the "heavy" lifting of passing new CAFE standards and then do nothing to discourage fuel consumption on the runways or at the thermostat or anywhere else. The policy is inadequate, and the incidence falls too much on people who "need" to drive large vehicles over large distances.

It is the barrel of oil that bankrolls the dictators, regardless of how it is used. So to stop bankrolling the dictators, discourage the consumption of oil in all of its forms. Impose a tax on each barrel of oil.